Grow transit, cut expenses, convert digitals, fewer acquisitions. That’s OUTFRONT’s plan for the next year based on CEO Jeremy Male’s comments at the Citi 2023 Global Tech Conference last week. Here are some highlights.
Goals for the year ahead
Getting the top line moving again next year…particularly within our transit business which has been difficult for us…we’ve got…some plans to do that particularly as we connect our digital transit assets to the programmatic platforms… We are very focused in terms of our transit agreements and how we can improve some of those agreements obviously the big dog there is the MTA…We’re looking very hard at billboard margins and our margins in general so we’re keeping a very close eye on our SG&A and reducing our SG&A costs as a percentage of revenue as we go into 2024.
The ad market is not robust
…It would be very hard to describe the ad market as robust… I was looking at some numbers earlier on today and it seems that next year most people are plugging in growth of around 5% plus political of another four or five whatever so they’re talking overall just talking yeah overall that dollars. In fact when you drill in and you look at out of home, out of home is also forecast to be growing mid-single digits next year…the writers and actors strike has had impacted us so TV is down for us right now…tech dollars are certainly down, real estate dollars are down…legal for example is very strong…and health is pretty good so…it’s a it’s a mixed bag.
OUTFRONT wants a 20% IRR on digital conversions
We literally don’t sign off at digital conversion unless it’s 20% plus IRR
OUTFRONT is attempting to renegotiate transit contracts.
…We are in discussions with the majority of our principal transit partners including the MTA as to how we can better reflect the reality of 2023 and transit advertising going forward…there’s sort of four main pieces to a transit contract you’ve got capital investment and who makes it OK whether or not it falls to the media partner or whether or not it remains with the transit operator you’ve got what guaranteed revenues you know what revenue stream to the transit company you might be prepared to make or were prepared to make and whether or not that’s still reasonable given the change in in the market shift you’ve then got the revenue share yeah OK and if you think about revenue shares you know maybe it made sense to work on 60 percent 60% shares if revenues were 100 but if revenues are now 70 our cost of operating that business is still the same so you know you need to look at revenue shares…and then duration would be the final piece…
Why OUTFRONT is doing fewer acquisition
…Public multiples have gone down private multiples or private expectations haven’t necessarily followed so I think that is part of it…we’re keeping room our balance sheet also we believe that we have some great opportunity to sweat some of the assets that we’ve either acquired or built over the last 18 months yeah and that that’s where we’re gonna focus most of our attention… that doesn’t mean they’re great opportunity comes along we wouldn’t pursue it but…we’re just…taking…a more balanced approach.
OUTFRONT wants to reduce Debt/Cashflow to 4.0:1.0.
Our leverage is between 5.0 and 5.5…Our first object is to get back down below 5 and we’d like to then drift down towards 4.
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